The Supreme Court of Appeal (SCA) has now at last settled the uncertainty in relation to the application of rebate item 412.09 of Schedule 4 (“the rebate”) to the Customs and Excise Act 91 of 1964 (“the Act”) when it handed down judgment in the case of SARS v Encarnacao N.O.  on 29 May 2018.

Since the enactment of rebate there was uncertainty whether goods carried in bond that are robbed or hi jacked, qualify for the rebate. In the past SARS contended that such goods lost in a robbery or hi jacking entered home consumption and called for payment of duties and VAT.

In the court of first instance it was held that the requirements of the rebate were met, including that the goods were not entered for home consumption prior to the incident.
The rebate provides that:

“Goods, proved to have been lost, destroyed or damaged on a single occasion in circumstances of vis mayor or in such other circumstances as the Commissioner deems exceptional while the goods are –

a. in any customs and excise warehouse etc.;
b. being removed with deferment of payment; or
c. being stored in any rebate store-room, provided-

i. no compensation in respect of the customs duty will be paid to the owner of the goods;
ii. such loss, destruction or damage was not due to fraud or negligence and
iii. such goods did not enter home consumption.”

The interpretation of the third proviso was the crux of the decision i.e. whether such goods enter home consumption.
SARS argued that the concept of “home consumption” does not arise when the goods enter the market, but rather when the bill of entry is delivered to SARS. SARS based its argument on section 45(1)(b) of the Act which refers to goods removed, taken or delivered without due entry for home consumption having been made’. As result SARS argued, it does not matter the goods are entered illicitly by a robber or lawfully by the importer; either way the goods enter the market (home consumption) and thus it was argued duties are payable.
The SCA found against SARS and held that:

• the conditions set in section 45(1)(b) are far wider than the conditions contained in the rebate;
• the provisions of section 76(2)(d), which allow for a refund where the goods concerned having been damaged, destroyed or irrecoverably lost by circumstances beyond his control prior to the release thereof for home consumption, do not support the interpretation suggested by SARS;
• Armed robbery falls within the scope of vis major and good that are lost as a result of an armed robbery fall within the meaning of the rebate since essentially they are beyond reasonable control.

The incredibly good news for importers, warehouse licensees and removers of goods in bond is that there is now certainty - goods that are lost due to irresistible force may now be accounted for in terms of rebate item 412.09 and duty and VAT will not be paid.